Analyzing Gates Industrial (NYSE:GTES) and IHI (OTCMKTS:IHICY)

IHI (OTCMKTS:IHICY) and Gates Industrial (NYSE:GTES) are both industrials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, risk, analyst recommendations, valuation, institutional ownership, dividends and profitability.

Analyst Ratings

This is a breakdown of recent recommendations for IHI and Gates Industrial, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
IHI	1	1	0	0	1.50
Gates Industrial	0	6	6	0	2.50

Gates Industrial has a consensus price target of $27.09, suggesting a potential upside of 18.85%. Given Gates Industrial’s stronger consensus rating and higher possible upside, analysts plainly believe Gates Industrial is more favorable than IHI.

Profitability

This table compares IHI and Gates Industrial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
IHI	6.50%	21.69%	4.70%
Gates Industrial	6.93%	10.38%	5.22%

Insider & Institutional Ownership

98.5% of Gates Industrial shares are held by institutional investors. 2.7% of Gates Industrial shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares IHI and Gates Industrial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
IHI	$10.68 billion	2.14	$744.08 million	$0.66	31.98
Gates Industrial	$3.41 billion	1.73	$194.90 million	$0.91	25.05

IHI has higher revenue and earnings than Gates Industrial. Gates Industrial is trading at a lower price-to-earnings ratio than IHI, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

IHI has a beta of 0.7, indicating that its stock price is 30% less volatile than the S&P 500. Comparatively, Gates Industrial has a beta of 1.24, indicating that its stock price is 24% more volatile than the S&P 500.

Summary

Gates Industrial beats IHI on 9 of the 14 factors compared between the two stocks.

About IHI

IHI Corporation designs and builds engineering solutions in Japan and internationally. The company operates through four segments: Resources, Energy and Environment; Social Infrastructure; Industrial Systems and General-Purpose Machinery; and Aero Engine, Space and Defense. The company engages in the manufacturing, sale, and provision of services related to power systems plants for land use and power systems for chips; carbon solutions comprising boilers and storage facilities; components for nuclear power plants; bridges and water gates, transport systems, shield systems, and concrete construction materials; vehicular turbochargers, parking, heat treatment and surface engineering; transport machineries; logistics and industrial systems; and rotating machineries comprising compressors, separation systems, and turbochargers for ships. It also offers 3D laser radars, X-ray inspection systems, monitoring equipment, oil leak monitors, vibration control systems and seismic isolation floor systems, and disaster prevention equipment; environmental monitoring; cryogenic products, material handling systems, steelmaking equipment, pulp and paper machinery, agricultural machinery, life associated equipment; aero engines; rocket, space utilization, defense, and traffic control systems; and communication, electronic, electric measuring, information processing machines, and other instruments and equipment. In addition, the company sells and rents real estate. The company was formerly known as Ishikawajima-Harima Heavy Industries Co., Ltd and changed its name to IHI Corporation in 2007. IHI Corporation was founded in 1853 and is headquartered in Tokyo, Japan.

About Gates Industrial

Gates Industrial Corporation PLC designs and manufactures power transmission equipment. Its products serves harsh and hazardous industries such as agriculture, construction, manufacturing and energy, to everyday consumer applications such as printers, power washers, automatic doors and vacuum cleaners and virtually every form of transportation.